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31147176 -325393 -325393 19664 19664 76000 380 152065 152445 9375795 46879 13576206 17370807 30993892 9456438 47282 13742858 17065098 30855238 -565407 -565407 10000 50 21049 21099 9466438 47332 13763907 16499691 30310930 9350795 46754 13523356 17276665 30846775 94142 94142 5400 5400 25000 125 47450 47575 9375795 46879 13576206 17370807 30993892 1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A)    BASIS OF PRESENTATION The condensed consolidated balance sheets as of December 31, 2025 and June 30, 2025, the condensed consolidated statements of operations for the three and six months ended December 31, 2025 and 2024, the condensed consolidated statements of cash flows for the six months ended December 31, 2025 and 2024, and the condensed consolidated statements of stockholders' equity for the three and six months ended December 31, 2025 and 2024, have been prepared by the Company in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and have not been audited.  In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for all periods presented have been made. The operating results for any interim period are not necessarily indicative of the operating results that may be experienced for the full fiscal year. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2025. The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses. Significant estimates and assumptions are used for, but are not limited to, allowances for credit losses, reserves for excess and obsolete inventories, long-lived and right-of-use assets, income tax valuation allowance, stock-based compensation and deferred compensation. Actual results could differ from the Company's estimates. B)    INVESTMENTS Debt securities are classified as held-to-maturity as the Company has the positive intent and ability to hold them to maturity. The securities are carried at amortized cost as current or noncurrent based upon maturity date and unrealized gains and losses are recognized when realized. The amortized cost of debt securities is adjusted for amortization of premium and accretion of discounts to maturity. Such amortization or accretion is included in interest income, along with other interest income earned on cash and cash equivalents. Accrued interest receivable on held-to-maturity debt securities is shown separately on the condensed consolidated balance sheets and is not included in any estimate for credit losses. No allowance for credit losses on held-to-maturity U.S. Treasury securities is recorded as these securities have the following characteristics that support a zero-loss expectation: they are explicitly guaranteed by the U.S. government, are consistently highly rated by major rating agencies and have a long history of no credit losses. See Note 2 for additional information on investments. C)    FAIR VALUE MEASUREMENTS Cash equivalents, accounts receivable, and accounts payable approximate fair value based on the short maturity of these instruments. The Company’s U.S. treasury debt securities are recorded at amortized cost with fair value disclosure. They have a readily available market price (Level 1 input), thus a lesser degree of judgment needs to be used in measuring fair value, and fair value was determined by quoted market prices. The fair value is based upon quoted market prices and is disclosed in Note 2. D) LEGAL COSTS All legal costs related to litigation for which the Company is liable are charged to operations as incurred, except contingent legal fees as described below. Proceeds from the settlement of legal disputes are recorded in other income when the amounts are determinable, and the collection is certain. License proceeds are considered functional and as such are recorded at a point in time, based on the underlying agreement. Related contingent legal fees and expenses are recorded in selling, general and administrative expense at that time. Changes to the contingent legal fee expenses could have a material impact on the results of operations.‎ E) OTHER INCOME In the three and six months ended December 31, 2025, the Company received licensing proceeds of $250,000, which were recorded as other income. Other income is shown as a separate line on the condensed consolidated statements of operations. No such licensing proceeds were recorded during the same periods in the prior year. F)    INCOME TAXES We estimate a provision for income taxes based on the effective tax rate expected to be applicable for the fiscal year. If the actual results are different from these estimates, adjustments to the effective tax rate may be required in the period such determination is made. Additionally, discrete items are treated separately from the effective rate analysis and are recorded separately as an income tax provision or benefit at the time they are recognized. State income tax provisions of $2,760 and $5,520, respectively, were recorded for the three- and six-month periods ending December 31, 2025 and 2024 for the required minimum state tax payments. There were no federal income tax provisions recorded during the first six months of fiscal years 2026 and 2025 due to net operating loss carryforwards (“NOLs”) available to offset taxable income. Application of available NOLs to potential future taxable income would minimize any tax payment requirements. NOLs arising in tax years beginning after December 31, 2017 are limited to 80 percent of taxable income per the Tax Cuts and Jobs Act (“TCJA”) and, as such, the future utilization of all federal NOLs available to the Company are so limited. The Company's tax loss carryforward as of December 31, 2025 was approximately $34,760,000. Given the cumulative taxable losses for the last three years, excluding one-time items, the expectation for utilization of the estimated tax loss carryforward is not likely, and as such, the future realization of this continues to be uncertain. The valuation allowance was adjusted to continue to fully offset the net deferred tax asset as there is sufficient negative evidence to support a full valuation allowance. G) DEFERRED COMPENSATION The Company’s deferred compensation liability is for a current officer and is calculated based on years of service and compensation, along with various assumptions related to expected retirement date, discount rates, and mortality tables. The related expense is calculated using the net present value of the expected payments and is included in selling, general and administrative expenses in the condensed consolidated statements of operations. The deferred compensation liability recorded at December 31, 2025 and June 30, 2025 is $2,446,703 and $2,226,454, respectively. Compensation expense of $59,364 and $220,249, respectively, was recorded during the three and six months ended December 31, 2025 as a result of the increase in the deferred compensation liability for the current officer, due mainly to the annual increase in the future payments earned under the arrangement due to completing an additional year of service, as well as a decrease in the discount factor. The discount factor used to calculate the net present value of the liability was 5.81% at June 30, 2025 and declined to 5.45% at December 31, 2025. For the three and six months ended December 31, 2024, compensation (income) and expense of ($62,710) and $134,665, respectively, were recorded under this arrangement. H) RECENT ACCOUNTING PRONOUNCEMENTS Recently Adopted Accounting Pronouncements In December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU focuses on income tax disclosures around effective tax rates and cash income taxes paid and requires consistent categories and greater disaggregation of information in the rate reconciliation, income taxes paid disaggregated by jurisdiction and certain other amendments. The new guidance was adopted prospectively as of July 1, 2025 and ASU 2023-09 does not mandate retrospective disclosure. Given the ASU relates solely to disclosure requirements, adoption does not have a material impact on the Company’s financial position, results of operations or cash flows. See Note 4 for further information. Recently Issued Accounting Pronouncements Not Yet Adopted In March 2024, FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220 40): Disaggregation of Certain Income Statement Expenses, which was subsequently amended by ASU 2025-01 in January 2025 to clarify and refine certain requirements. The ASU requires public business entities to disclose in the notes to the financial statements the amounts of employee compensation, depreciation, amortization, and inventory costs included in each relevant income statement line item. The guidance also requires disclosure of other expense categories if they are significant to an understanding of the entity’s financial performance. The amendments are effective for annual periods beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027 and entities are required to apply the amendments retrospectively. Early adoption is permitted. The Company will evaluate the impact of the standards on its consolidated financial statements and related disclosures. While the adoption of ASU 2024-03 and ASU 2025-01 will not affect the Company’s recognition, measurement or presentation of expenses on the face of the consolidated statements of operations, it is expected to result in expanded disclosures in the notes to the consolidated financial statements. The Company has not yet determined whether it will early adopt the guidance. A)    BASIS OF PRESENTATION The condensed consolidated balance sheets as of December 31, 2025 and June 30, 2025, the condensed consolidated statements of operations for the three and six months ended December 31, 2025 and 2024, the condensed consolidated statements of cash flows for the six months ended December 31, 2025 and 2024, and the condensed consolidated statements of stockholders' equity for the three and six months ended December 31, 2025 and 2024, have been prepared by the Company in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and have not been audited.  In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for all periods presented have been made. The operating results for any interim period are not necessarily indicative of the operating results that may be experienced for the full fiscal year. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2025. The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses. Significant estimates and assumptions are used for, but are not limited to, allowances for credit losses, reserves for excess and obsolete inventories, long-lived and right-of-use assets, income tax valuation allowance, stock-based compensation and deferred compensation. Actual results could differ from the Company's estimates. --06-30 B)    INVESTMENTS Debt securities are classified as held-to-maturity as the Company has the positive intent and ability to hold them to maturity. The securities are carried at amortized cost as current or noncurrent based upon maturity date and unrealized gains and losses are recognized when realized. The amortized cost of debt securities is adjusted for amortization of premium and accretion of discounts to maturity. Such amortization or accretion is included in interest income, along with other interest income earned on cash and cash equivalents. Accrued interest receivable on held-to-maturity debt securities is shown separately on the condensed consolidated balance sheets and is not included in any estimate for credit losses. No allowance for credit losses on held-to-maturity U.S. Treasury securities is recorded as these securities have the following characteristics that support a zero-loss expectation: they are explicitly guaranteed by the U.S. government, are consistently highly rated by major rating agencies and have a long history of no credit losses. See Note 2 for additional information on investments. 0 C)    FAIR VALUE MEASUREMENTS Cash equivalents, accounts receivable, and accounts payable approximate fair value based on the short maturity of these instruments. The Company’s U.S. treasury debt securities are recorded at amortized cost with fair value disclosure. They have a readily available market price (Level 1 input), thus a lesser degree of judgment needs to be used in measuring fair value, and fair value was determined by quoted market prices. The fair value is based upon quoted market prices and is disclosed in Note 2. D) LEGAL COSTS All legal costs related to litigation for which the Company is liable are charged to operations as incurred, except contingent legal fees as described below. Proceeds from the settlement of legal disputes are recorded in other income when the amounts are determinable, and the collection is certain. License proceeds are considered functional and as such are recorded at a point in time, based on the underlying agreement. Related contingent legal fees and expenses are recorded in selling, general and administrative expense at that time. Changes to the contingent legal fee expenses could have a material impact on the results of operations. E) OTHER INCOME In the three and six months ended December 31, 2025, the Company received licensing proceeds of $250,000, which were recorded as other income. Other income is shown as a separate line on the condensed consolidated statements of operations. No such licensing proceeds were recorded during the same periods in the prior year. 250000 250000 F)    INCOME TAXES We estimate a provision for income taxes based on the effective tax rate expected to be applicable for the fiscal year. If the actual results are different from these estimates, adjustments to the effective tax rate may be required in the period such determination is made. Additionally, discrete items are treated separately from the effective rate analysis and are recorded separately as an income tax provision or benefit at the time they are recognized. State income tax provisions of $2,760 and $5,520, respectively, were recorded for the three- and six-month periods ending December 31, 2025 and 2024 for the required minimum state tax payments. There were no federal income tax provisions recorded during the first six months of fiscal years 2026 and 2025 due to net operating loss carryforwards (“NOLs”) available to offset taxable income. Application of available NOLs to potential future taxable income would minimize any tax payment requirements. NOLs arising in tax years beginning after December 31, 2017 are limited to 80 percent of taxable income per the Tax Cuts and Jobs Act (“TCJA”) and, as such, the future utilization of all federal NOLs available to the Company are so limited. The Company's tax loss carryforward as of December 31, 2025 was approximately $34,760,000. Given the cumulative taxable losses for the last three years, excluding one-time items, the expectation for utilization of the estimated tax loss carryforward is not likely, and as such, the future realization of this continues to be uncertain. The valuation allowance was adjusted to continue to fully offset the net deferred tax asset as there is sufficient negative evidence to support a full valuation allowance. 2760 2760 5520 5520 0 0 34760000 G) DEFERRED COMPENSATION The Company’s deferred compensation liability is for a current officer and is calculated based on years of service and compensation, along with various assumptions related to expected retirement date, discount rates, and mortality tables. The related expense is calculated using the net present value of the expected payments and is included in selling, general and administrative expenses in the condensed consolidated statements of operations. The deferred compensation liability recorded at December 31, 2025 and June 30, 2025 is $2,446,703 and $2,226,454, respectively. Compensation expense of $59,364 and $220,249, respectively, was recorded during the three and six months ended December 31, 2025 as a result of the increase in the deferred compensation liability for the current officer, due mainly to the annual increase in the future payments earned under the arrangement due to completing an additional year of service, as well as a decrease in the discount factor. The discount factor used to calculate the net present value of the liability was 5.81% at June 30, 2025 and declined to 5.45% at December 31, 2025. For the three and six months ended December 31, 2024, compensation (income) and expense of ($62,710) and $134,665, respectively, were recorded under this arrangement. 2446703 2226454 59364 220249 0.0581 0.0545 -62710 134665 H) RECENT ACCOUNTING PRONOUNCEMENTS Recently Adopted Accounting Pronouncements In December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU focuses on income tax disclosures around effective tax rates and cash income taxes paid and requires consistent categories and greater disaggregation of information in the rate reconciliation, income taxes paid disaggregated by jurisdiction and certain other amendments. The new guidance was adopted prospectively as of July 1, 2025 and ASU 2023-09 does not mandate retrospective disclosure. Given the ASU relates solely to disclosure requirements, adoption does not have a material impact on the Company’s financial position, results of operations or cash flows. See Note 4 for further information. Recently Issued Accounting Pronouncements Not Yet Adopted In March 2024, FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220 40): Disaggregation of Certain Income Statement Expenses, which was subsequently amended by ASU 2025-01 in January 2025 to clarify and refine certain requirements. The ASU requires public business entities to disclose in the notes to the financial statements the amounts of employee compensation, depreciation, amortization, and inventory costs included in each relevant income statement line item. The guidance also requires disclosure of other expense categories if they are significant to an understanding of the entity’s financial performance. The amendments are effective for annual periods beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027 and entities are required to apply the amendments retrospectively. Early adoption is permitted. The Company will evaluate the impact of the standards on its consolidated financial statements and related disclosures. While the adoption of ASU 2024-03 and ASU 2025-01 will not affect the Company’s recognition, measurement or presentation of expenses on the face of the consolidated statements of operations, it is expected to result in expanded disclosures in the notes to the consolidated financial statements. The Company has not yet determined whether it will early adopt the guidance. 2.    INVESTMENTS The following tables summarize the unrealized positions for the held-to-maturity debt securities as of December 31, 2025 and June 30, 2025: December 31, 2025 Amortized cost basis Gross unrealized gains Gross unrealized losses Fair ValueUS Treasury securities$ 16,999,909 $ 52,975 $ 4,447 $ 17,048,437Total$ 16,999,909 $ 52,975 $ 4,447 $ 17,048,437 June 30, 2025 Amortized cost basis Gross unrealized gains Gross unrealized losses Fair ValueUS Treasury securities$ 16,880,656 $ 52,103 $ 625 $ 16,932,134Total$ 16,880,656 $ 52,103 $ 625 $ 16,932,134 The following tables summarize the fair value and amortized cost basis of the held-to-maturity debt securities by contractual maturity as of December 31, 2025 and June 30, 2025: December 31, 2025 Amortized Cost Basis Fair valueDue within one year$ 13,005,592 $ 13,042,936Due after one year through five years 3,994,317 4,005,501Total$ 16,999,909 $ 17,048,437 June 30, 2025 Amortized Cost Basis Fair valueDue within one year$ 12,879,882 $ 12,909,183Due after one year through five years 4,000,774 4,022,951Total$ 16,880,656 $ 16,932,134 December 31, 2025 Amortized cost basis Gross unrealized gains Gross unrealized losses Fair ValueUS Treasury securities$ 16,999,909 $ 52,975 $ 4,447 $ 17,048,437Total$ 16,999,909 $ 52,975 $ 4,447 $ 17,048,437 June 30, 2025 Amortized cost basis Gross unrealized gains Gross unrealized losses Fair ValueUS Treasury securities$ 16,880,656 $ 52,103 $ 625 $ 16,932,134Total$ 16,880,656 $ 52,103 $ 625 $ 16,932,134 16999909 52975 4447 17048437 16999909 52975 4447 17048437 16880656 52103 625 16932134 16880656 52103 625 16932134 December 31, 2025 Amortized Cost Basis Fair valueDue within one year$ 13,005,592 $ 13,042,936Due after one year through five years 3,994,317 4,005,501Total$ 16,999,909 $ 17,048,437 June 30, 2025 Amortized Cost Basis Fair valueDue within one year$ 12,879,882 $ 12,909,183Due after one year through five years 4,000,774 4,022,951Total$ 16,880,656 $ 16,932,134 13005592 13042936 3994317 4005501 16999909 17048437 12879882 12909183 4000774 4022951 16880656 16932134 3.    INVENTORIES The components of inventories were as follows:  December 31, 2025 June 30, 2025Raw materials$ 1,865,943 $ 1,966,662Finished goods 4,895,392 4,815,881Inventories, gross 6,761,335 6,782,543Reserve for obsolete inventory (1,922,958) (1,897,476)Inventories, net$ 4,838,377 $ 4,885,067 December 31, 2025 June 30, 2025Raw materials$ 1,865,943 $ 1,966,662Finished goods 4,895,392 4,815,881Inventories, gross 6,761,335 6,782,543Reserve for obsolete inventory (1,922,958) (1,897,476)Inventories, net$ 4,838,377 $ 4,885,067 1865943 1966662 4895392 4815881 6761335 6782543 1922958 1897476 4838377 4885067 ‎ 4.    INCOME TAXES The Company utilizes the liability method of accounting for income taxes. The liability method measures the expected income tax impact of future taxable income and deductions implicit in the condensed consolidated balance sheets. The Company’s income tax expense for the three and six months ended December 31, 2025 and 2024 consisted of the following: Three Months Ended Six Months Ended December 31, December 31, 2025 2024 2025 2024Federal$ — $ — $ — $ —State 2,760 2,760 5,520 5,520Foreign — — — —Total income tax provision$ 2,760 $ 2,760 $ 5,520 $ 5,520 All income is derived from domestic operations. For the three and six months ended December 31, 2025, respectively, the effective tax rate was less than 1% and 1.7%, respectively. The effective tax rate for the three and six months ended December 31, 2024 was 2.8% and 1.7%, respectively. It is anticipated that the effective rate in future years will continue to be reduced by utilization of a portion or all of the available federal and state NOL carryforwards that existed as of June 30, 2025. The effective tax rate for the current quarter differs from the U.S. federal statutory rate of 21% primarily due to: State income taxes, net of federal benefitOfficer life insuranceNon-deductible meals and entertainment expenseResearch and development tax creditsNondeductible stock options expenseChanges in valuation allowances on deferred tax assets‎The Company will provide the enhanced annual disclosures required by ASU 2023-09, including the detailed rate reconciliation and jurisdictional income taxes paid, in its Form 10-K for the year ending June 30, 2026. No material changes in uncertain tax positions or valuation allowances were recorded during the three- and six-month periods ended December 31, 2025 or 2024. Three Months Ended Six Months Ended December 31, December 31, 2025 2024 2025 2024Federal$ — $ — $ — $ —State 2,760 2,760 5,520 5,520Foreign — — — —Total income tax provision$ 2,760 $ 2,760 $ 5,520 $ 5,520 2760 2760 5520 5520 2760 2760 5520 5520 0.01 0.017 0.028 0.017 0.21 5.    CREDIT FACILITY On May 14, 2019, the Company entered into a secured credit facility (“Credit Agreement”) with Town Bank (“Lender”). The Credit Agreement provides for a $5,000,000 revolving secured credit facility for letters of credit for the benefit of the Company of up to a sublimit of $1,000,000. There are no unused line fees in the credit facility. On January 28, 2021, the Credit Agreement was amended to change the interest rate to Wall Street Journal Prime less 1.50%. An amendment to the Credit Agreement effective October 30, 2024, extended the maturity date to October 31, 2026, and removed one of the covenants requiring submission of annual financial performance projections to the Lender. The Company and the Lender also entered into a General Business Security Agreement dated May 14, 2019 under which the Company granted the Lender a security interest in substantially all of the Company’s assets in connection with the Company’s obligations under the Credit Agreement. The Credit Agreement contains certain affirmative and negative covenants customary for financings of this type. The negative covenants include restrictions on other indebtedness, liens, fundamental changes, certain investments, disposition of assets, mergers and liquidations, among other restrictions. As of December 31, 2025, the Company was in compliance with all covenants related to the Credit Agreement. As of December 31, 2025 and June 30, 2025, there were no outstanding borrowings on the facility.  5000000 1000000 0 0.0150 0 0 ‎ 6.    REVENUE RECOGNITION The Company disaggregates its net sales by geographical location as it believes it best depicts how the nature, timing and uncertainty of net sales and cash flows are affected by economic factors. The following table summarizes net sales by geographical location:  Three Months Ended Six Months Ended December 31, December 31, 2025 2024 2025 2024United States$ 2,249,103 $ 2,181,541 $ 5,570,841 $ 4,348,905Export 612,276 1,375,545 1,361,316 2,410,049Net Sales$ 2,861,379 $ 3,557,086 $ 6,932,157 $ 6,758,954 Deferred revenue relates primarily to consumer and customer warranties. These constitute future performance obligations, and the Company defers revenue related to these future performance obligations. Effective July 1, 2023, the Company increased its deferral rates from 2.4% to 3% for domestic sales and decreased its deferral rate from 10% to 8% for export sales to reflect recent warranty experience. In the six months ended December 31, 2025 and 2024, the Company recognized revenue, which was included in the deferred revenue liability at the beginning of those periods of $153,935 and $141,787, respectively, for performance obligations related to consumer and customer warranties. The Company estimates that the deferred revenue performance obligations are satisfied within one year to three years and therefore uses that same timeframe for recognition of the deferred revenue. Three Months Ended Six Months Ended December 31, December 31, 2025 2024 2025 2024United States$ 2,249,103 $ 2,181,541 $ 5,570,841 $ 4,348,905Export 612,276 1,375,545 1,361,316 2,410,049Net Sales$ 2,861,379 $ 3,557,086 $ 6,932,157 $ 6,758,954 2249103 2181541 5570841 4348905 612276 1375545 1361316 2410049 2861379 3557086 6932157 6758954 0.024 0.03 0.10 0.08 153935 141787 P1Y P3Y 7. INCOME (LOSS) PER COMMON AND COMMON STOCK EQUIVALENT SHARE Basic income (loss) per common share is computed based on the weighted-average number of common shares outstanding. Diluted income (loss) per common share is calculated assuming the exercise of stock options except where the result would be anti-dilutive. The following table reconciles the numerator and denominator used to calculate basic and diluted income (loss) per share: Three Months Ended December 31, Six Months Ended December 31, 2025 2024 2025 2024Numerator Net income (loss)$ (565,407) $ 94,142 $ (321,678) $ (325,393) Denominator Weighted average shares, basic 9,462,416 9,355,686 9,459,427 9,332,844Dilutive effect of stock compensation awards (1) — 273,849 — —Diluted shares 9,462,416 9,629,535 9,459,427 9,332,844 Net income (loss) attributable to common shareholders per share: Basic$ (0.06) $ 0.01 $ (0.03) $ (0.03)Diluted$ (0.06) $ 0.01 $ (0.03) $ (0.03) (1) Weighted average stock options excluded during the three months ended December 31, 2025 and the six months ended December 31, 2025 and 2024 due to anti-dilution were 72,696, 98,030, and 425,304, respectively. For the three months ended December 31, 2024, no stock options were anti-dilutive. Three Months Ended December 31, Six Months Ended December 31, 2025 2024 2025 2024Numerator Net income (loss)$ (565,407) $ 94,142 $ (321,678) $ (325,393) Denominator Weighted average shares, basic 9,462,416 9,355,686 9,459,427 9,332,844Dilutive effect of stock compensation awards (1) — 273,849 — —Diluted shares 9,462,416 9,629,535 9,459,427 9,332,844 Net income (loss) attributable to common shareholders per share: Basic$ (0.06) $ 0.01 $ (0.03) $ (0.03)Diluted$ (0.06) $ 0.01 $ (0.03) $ (0.03) (1) Weighted average stock options excluded during the three months ended December 31, 2025 and the six months ended December 31, 2025 and 2024 due to anti-dilution were 72,696, 98,030, and 425,304, respectively. For the three months ended December 31, 2024, no stock options were anti-dilutive. -565407 94142 -321678 -325393 9462416 9355686 9459427 9332844 273849 9462416 9629535 9459427 9332844 -0.06 0.01 -0.03 -0.03 -0.06 0.01 -0.03 -0.03 72696 98030 425304 0 8.    RELATED PARTY TRANSACTIONS The Company leases its facility in Milwaukee, Wisconsin from Koss Holdings, LLC, which is controlled by five equal ownership interests in trusts held by the five beneficiaries of a former chairman’s revocable trust and includes current stockholders of the Company. On May 24, 2022, the lease was renewed for a period of five years, ending June 30, 2028, and is being accounted for as an operating lease. The lease extension maintained the rent at a fixed rate of $380,000 per year and included an option to renew at an increased rate of $397,000 for an additional five years ending June 30, 2033. The negotiated increase in rent slated for 2028 will be the first increase in rent since 1996. The Company is responsible for all property maintenance, insurance, taxes and other normal expenses related to ownership. P5Y 380000 397000 P5Y 9.    ACCOUNTS RECEIVABLE CONCENTRATIONS As of December 31, 2025, three of the Company’s customers each represented more than 10% of total accounts receivable, and collectively these customers accounted for approximately 46% of total accounts receivable (19%, 14% and 13%, respectively). At June 30, 2025, three customers each represented more than 10% of total accounts receivable (16%, 13% and 11%, respectively), comprising approximately 40% of total trade receivables. 3 0.46 0.19 0.14 0.13 3 0.16 0.13 0.11 0.40 10.   SEGMENT INFORMATION The Company has a single reportable segment, the design, manufacture and sale of headphones and related accessories, which reflects the manner in which the Company’s Chief Executive Officer, who is the Company’s chief operating decision maker (“CODM”), regularly reviews financial information to manage the business, allocate resources and assess performance. The headphones are sold through retailers and distributors both domestically and internationally, as well as direct-to-consumer. The CODM regularly reviews revenue, certain significant expense categories, net income and select balance sheet items in evaluating segment performance. The significant segment expense categories and other segment items provided to the CODM and included in the measure of segment profit or loss are presented below. Three Months Ended Six Months Ended December 31, December 31, 2025 2024 2025 2024Net sales $ 2,861,379 $ 3,557,086 $ 6,932,157 $ 6,758,954Cost of goods sold 2,030,573 2,152,129 4,472,659 4,181,071Gross profit margin 29.0% 39.5% 35.5% 38.1%Selling, general and administrative expenses: New product certification and compliance testing 14,619 3,229 27,651 90,970Legal and professional expense 418,239 273,411 647,373 557,302Deferred compensation expense (income) 59,364 (62,710) 220,249 134,665Other selling, general and administrative expenses 1,353,162 1,332,811 2,624,843 2,573,863Selling, general and administrative expenses 1,845,384 1,546,741 3,520,116 3,356,800Net income (loss) (565,407) 94,142 (321,678) (325,393) Segment net income (loss) includes interest income, other income, interest expense and income taxes. The CODM also reviews the following balance sheet items at period-end as part of performance monitoring and resource allocation decisions: As of December 31, 2025 June 30, 2025Cash and cash equivalents $2,464,838 $2,807,797Short term investments 13,005,592 12,879,882Long term investments 3,994,317 4,000,774Inventories 4,838,377 4,885,067Total segment assets 36,769,678 37,184,609 The Company applied the provisions of ASU 2023-07 retrospectively and has included comparative information for the three and six months ended December 31, 2024 for statement of operations items. Because the Company operates as a single reportable segment, the amounts above reconcile directly to the corresponding condensed consolidated financial statement line items. There was no impact on previously reported consolidated net income, financial position or cash flows. The CODM regularly reviews revenue, certain significant expense categories, net income and select balance sheet items in evaluating segment performance. The significant segment expense categories and other segment items provided to the CODM and included in the measure of segment profit or loss are presented below. Three Months Ended Six Months Ended December 31, December 31, 2025 2024 2025 2024Net sales $ 2,861,379 $ 3,557,086 $ 6,932,157 $ 6,758,954Cost of goods sold 2,030,573 2,152,129 4,472,659 4,181,071Gross profit margin 29.0% 39.5% 35.5% 38.1%Selling, general and administrative expenses: New product certification and compliance testing 14,619 3,229 27,651 90,970Legal and professional expense 418,239 273,411 647,373 557,302Deferred compensation expense (income) 59,364 (62,710) 220,249 134,665Other selling, general and administrative expenses 1,353,162 1,332,811 2,624,843 2,573,863Selling, general and administrative expenses 1,845,384 1,546,741 3,520,116 3,356,800Net income (loss) (565,407) 94,142 (321,678) (325,393) Segment net income (loss) includes interest income, other income, interest expense and income taxes. The CODM also reviews the following balance sheet items at period-end as part of performance monitoring and resource allocation decisions: As of December 31, 2025 June 30, 2025Cash and cash equivalents $2,464,838 $2,807,797Short term investments 13,005,592 12,879,882Long term investments 3,994,317 4,000,774Inventories 4,838,377 4,885,067Total segment assets 36,769,678 37,184,609 2861379 3557086 6932157 6758954 2030573 2152129 4472659 4181071 0.290 0.395 0.355 0.381 14619 3229 27651 90970 418239 273411 647373 557302 59364 -62710 220249 134665 1353162 1332811 2624843 2573863 1845384 1546741 3520116 3356800 -565407 94142 -321678 -325393 2464838 2807797 13005592 12879882 3994317 4000774 4838377 4885067 36769678 37184609 11.    LEGAL MATTERS As of December 31, 2025, the Company is involved in the matters described below: The Company maintains a program focused on enforcing its intellectual property and, in particular, certain patents in its patent portfolio. As part of this program, the Company filed complaints against certain parties alleging infringement on the Company’s patents relating to its wireless audio technology. In the event that a monetary award or judgment is received by the Company in connection with these complaints, all or portions of such amounts, such as contingent legal fees, will be due to third parties. The Company may incur additional fees and costs related to these lawsuits, however, timing and impact on its condensed financial statements is uncertain. Depending on the response to and the underlying results of the enforcement program, the Company may continue to litigate its claims, enter into licensing arrangements or reach some other outcome potentially advantageous to its competitive position. The ultimate resolution of these matters is not determinable unless otherwise noted. On November 20, 2025, the Company resolved its lawsuit against PEAG, LLC d/b/a JLab Audio and granted a license covering certain of its patents. Gross proceeds of $250,000 were recognized and recorded as other income during the three and six months ended December 31, 2025. Total contingent legal fees and related expenses of $250,000 offset these proceeds and were recorded as a selling, general and administrative expense during the three and six months ended December 31, 2025. In early fiscal 2020, the Company was notified by One-E-Way, Inc. (“One-E-Way”) that some of the Company's wireless products may infringe on certain One-E-Way patents. A Supplemental Notice of Infringement was served on the Company on March 18, 2025 and the complaint was resolved in September 2025. The matter was resolved at a cost of $22,200 and had been adequately accrued for as of June 30, 2025. The Company is also subject to a variety of other claims and suits that arise from time to time in the ordinary course of its business. Although management currently believes that resolving these claims against the Company, individually or in the aggregate, will not have a material adverse impact on its condensed consolidated financial statements, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future. 250000 250000 250000 250000 22200